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Amazon takes bite out of Apple's market share for tablets

SAN JOSE, Calif. — In its first quarter of selling its own tablet computers, Amazon.com Inc. has become the second-biggest seller of the increasingly popular mobile devices by stealing market share from the still-dominant leader, Apple Inc., according to projections.

Amazon will ship 3.9 million Kindle Fire tablets in the fourth quarter, according to analysis firm IHS, giving it 13.8 percent of the global tablet business. Cupertino, Calif.-based Apple, which sells the popular iPad tablet, still controls 65.6 percent of the market, but that is down from 69.7 percent in the third quarter.

“Nearly two years after Apple Inc. rolled out the iPad, a competitor has finally developed an alternative which looks like it might have enough of Apple’s secret sauce to succeed,” said Rhoda Alexander, the senior manager for tablet research at IHS.

Amazon sells the Kindle Fire, a full-color tablet version of its popular Kindle e-reader, for $199 — much lower than the iPad, which starts at $499. The lower price and Amazon’s approach to the market have brought in “a brand-new set of media tablet buyers,” Alexander said.

Amazon also pushed down Samsung’s market share, from 7.8 percent in the third quarter to 4.8 percent in the fourth quarter, IHS said. Like Amazon, Samsung sells tablets based on Google Android operating system.

“The Kindle Fire has created chaos in the Android tablet market,” Alexander said.

Because of the new buyers Amazon has managed to capture with its low prices, IHS says that 64.7 million tablets will be sold in the United States this year, up from a previous estimate of 60 million and a dramatic increase from the 2010 total of 17.4 million.

Amazon, based in Seattle, reportedly sells the Kindle Fire at a loss, with IHS previously reporting that the company pays $201.70 in parts and costs to build each tablet. It hopes to make more money in digital sales, however, as customers buy e-books, music, movies and TV shows from the online retailer to view on the Kindle Fire.

“As long as this strategy is successful, the company can afford to take a loss on the hardware — while its Android competitors cannot,” Alexander pointed out.

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